How will chois new depreciation rule affect profit margin

Assignment Help Accounting Basics

Reference no: EM132449644

Flo Choi owns a small business and manages its accounting. Her company just finished a year in which a large amount of borrowed funds was invested in a new building addition as well as in equipment and fixture additions. Choi's banker requires her to submit semiannual financial statements so he can monitor the financial health of her business. He has warned her that if profit margins erode, he might raise the interest rate on the borrowed funds to reflect the increased loan risk from the bank's point of view. Choi knows profit margin is likely to decline this year. As she prepares year-end adjusting entries, she decides to apply the following depreciation rule: All asset additions are considered to be in use on the first day of the following month. (The previous rule assumed assets are in use on the first day of the month nearest to the purchase date.)

Required

Identify decisions that managers like Choi must make in applying depreciation methods.
Is Choi's rule an ethical violation, or is it a legitimate decision in computing depreciation?
How will Choi's new depreciation rule affect the profit margin of her business

Reference no: EM132449644

Questions Cloud

What is communication strategy with team : How often will you provide communication to your team about updates? You need to keep them informedWhat is communication strategy with team

What businesses are the leaders in the macro radio : What businesses are the leaders in the macro radio and core network space, and why is the U.S. government warning against the use of China's Huawei

Corporate social responsibility for competitive advantage : Corporate Social Responsibility for Competitive Advantage. Summarize the reasons why companies are adopting corporate social responsibility initiatives.

What are some factors that make one beer better than another : What are some factors that make one beer better than another? Even non-beer drinkers will likely focus on product attributes like taste or convenient packaging.

How will chois new depreciation rule affect profit margin : Is Choi's rule an ethical violation, or is it a legitimate decision in computing depreciation?How will Chois new depreciation rule affect profit margin

Prepare the expected cash collections during august : Prepare the expected cash collections during August. Prepare the expected cash disbursements during August. Calculate the expected cash balance on August 31.

Prepare a statement of comprehensive income : On January 20, 2018, Pearl, Inc. sold security A for $15,855. The sale proceeds are net of brokerage fees. Prepare a statement of comprehensive income for 2017

What impact understanding of financial management concepts : What impact has your improved understanding of financial management concepts had or do you anticipate it will have on the value you will bring to your role

Prepare Monty entry to record effect of the loss carryback : In 2018, Monty suffered a net operating loss of $482,000, Prepare Monty's entry to record the effect of the loss carryback

User Account

All Pages